Trade Compliance Bulletin | August 19, 2026

Section 338 Tariffs Update: Temporary Suspension | August 19, 2026

The U.S. has temporarily suspended implementation of the Section 338 tariffs on Canadian goods, including apparel and textiles. The US has threatened to impose 50% tariffs on a range of apparel goods totalling approximately over $340 million USD in exports.

On August 18, the U.S. postponed the tariffs' effective date from August 19 at 12:01 a.m. ET, to August 22, 2026. This is a short administrative extension, not a withdrawal. We hope this will serve as a basis for an agreement by the end of the week. The stumbling blocks remain sectoral tariffs (especially for automotives) and supply management for dairy.

At the same time, the US has indicated that energy issues (including the Keystone pipeline) are in play.

Companies should note that nothing has changed in terms of tariffs/customs clearance for goods shipped to the US as of today. If you can ship products this week and they can clear customs before the end of the day on Friday, you should do so. Many firms cannot, but if that is an option, firms should take advantage of it. Before making these decisions, consult your customs broker.

If anything changes after August 21, 2026, there will be guidance on the US Cargo Systems Messaging Service.

CAF's engagement with government

CAF wrote to Minister LeBlanc urging the Government to prevent at all costs the implementation of the 338 tariffs, and failing that, an exemption for CUSMA-compliant goods. Subsequently, we have worked with various departments to ensure the government understands the scale of the impact on this sector, and especially the impacts that have already been felt.
CAF challenged the notion that these tariffs only impact 5% of total Canadian exports - which has been a frequent talking point. A recent study by RBC has highlighted that apparel and textiles are among the products most impacted by the Section 338 tariffs. We have conveyed that to the CDN government.

What members are reporting

We collected impact data from over 100 exporters and relayed that information to the government, reinforcing our industry’s concerns. Members report:

A universal pre-deadline scramble to accelerate U.S.-bound shipments, causing production disruption and in some cases diverting products from Canadian customers.
Structural, multi-year U.S. market retrenchment on the part of many firms, with several firms reporting U.S. sales share falling from 20-40% of total business. Section 338 is simply the last in a series of tariff disruptions beginning with the end of the de minimis exemption.
Tariff uncertainty is already freezing Spring/Summer 2027 orders, regardless of whether the tariffs ultimately take effect
Layoffs and workforce reductions are currently underway or planned at multiple firms, ranging from a handful of positions to significant layoffs and delayed investments in textiles and apparel.
Firms are unable to pass tariff costs to U.S. customers or absorb them internally, compressing margins and pausing investment.
Companies are assessing the harm these measures are inflicting on their existing client relationships. Established, consistent long term customers are being lost.
Relocating production outside Canada is the dominant medium-term response among manufacturers, including shifting significant volume to lower-cost offshore facilities.

CAF contact

CAF members who need clarification on how this action may impact their businesses should contact Bob Kirke at the Canadian Apparel Federation (bkirke@apparel.ca).

If your firm is not already a member, contact us.

Sources

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